Question:
ADP is always in the news reporting employment data. How is the company as an investment?
Answer:
Automatic Data Processing, Inc. (NASDAQ: ADP) provides a wide range of business outsourcing solutions, including human resources, management payroll services, tax and benefits administration. The market considers ADP a high quality company, as it is one of four companies that have AAA-rated debt. We believe the company is a good position if the employment trends from the last few years continue. With more people being employed, ideally, ADP will have more business payroll to process and more employees needing benefits. The company spun off its brokerage services in 2007 as Broadridge Financial Solutions, Inc. (NYSE: BR) to focus on its core business. This has worked well for ADP. Currently, ADP shares trade at a price-to-earnings ratio that is higher than the market. While we think it is not a good time to buy ADP, we still believe the company is a good long-term holding.
Question:
I’ve owned shares of Visa for a little over a year. I’m ready to trim. Visa is about 9% of my portfolio. I’d be more comfortable if it were around 4%, but your opinions are welcome as are recommendations of what to buy.
Answer:
We agree that it is time for you to trim your holding in the global payment technology company, Visa, Inc. (NYSE: V). The stock has done well in the space, and we believe it is going to continue to grow. Volumes grew by 9% for processors in 2013. Visa trades at 30 times earnings, while its competitor American Express Company, (NYSE: AXP) is cheaper at 19 times earnings. If you are looking to stay in the same space, American Express is one we like better, as the company has a high return on equity.
Question:
FireEye, Inc. has “been on fire” since acquiring Mandiant in early January. What do you think of this company?
Answer:
FireEye, Inc. (NASDAQ: FEYE) invented a virtual machine-based security platform that provides real-time protection against the next generation of cyber-attacks. The company acquired Mandiant, another cyber-security firm, for $1 billion. It is not uncommon for technology firms to use their stock as currency to acquire other firms in hopes of building profits. Right now, FireEye, Inc. is too risky in our opinion because the company has no profits. Tomorrow a new technology could make them obsolete. However, just as easily, they could become a take-over target for a larger, established technology company. With this uncertainty, we recommend avoiding this stock.
Question:
I’m looking to add to my Cyclicals. I’m looking at Container Store and Stamps.com. Do you have strong feelings for either?
Answer:
The Container Store Group, Inc. (NYSE: TCS) is a specialty retailer of storage and organization products and shelving solutions. The company is still running at a loss, and may be very dependent on the housing market. Stamps.com (NASDAQ: STMP) offers online postage solutions. While the business is growing, we see this as a one-trick-pony. We do not recommend either company.
Question:
We own a small/medium size business. Our CPA mentioned we could do a gift/leaseback with our child to help him with college expenses. I know this is probably a lot more than you can get into, but can you give me a breakdown of what this is?
Answer:
A gift/leaseback is where you give your child an asset or place the asset in a trust that benefits the child. Your business then leases back the asset from the child, providing the child with an income stream that is taxed at the child’s lower tax rates. Your company also receives a tax deduction for the lease payments made. The IRS closely watches these transactions, because if this is not done with an intended purpose aside from income shifting, the IRS may consider this a sham transaction.
To do this properly, you will want to consult a lawyer and an accountant experienced with such deals. The gift of the asset may also come with gift tax implications. Additionally, the income stream the child receives may affect his eligibility for financial aid as income is considered heavily on the Free Application for Federal Student Aid.
At Henssler Financial we believe you should Live Ready, and that includes consulting experts for financial matters you do not understand. If you have questions regarding your financial situation the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
